LeadingAge Submits Three-Year Certification Interim Rule Comments

Regulation | January 10, 2018 | by Colleen Bloom

LeadingAge has submitted comments on HUD's interim final rule to implement FAST Act provisions that, among other things, allow public housing agencies (PHAs) and multifamily housing owners to conduct less-than-full income and asset verifications for families with 90 percent or more of their income coming from fixed-income sources.

As previously addressed, HUD is implementing FAST Act provisions that, among other things, allow public housing agencies (PHAs) and multifamily housing owners to conduct less-than-full income and asset verifications for families with 90 percent or more of their income coming from fixed-income sources, so full verification will only be required every three years instead of annually. This interim final rule takes effect on March 12 for owners who wish to take advantage of the new flexibilities.

LeadingAge on January 10 submitted comments on regulations.gov to this interim final rule that include appreciation for the expanded authority for multifamily providers to accept self-certification of assets under $5000, concerns about the impact on medical expense deductions, desire for more details on how a potential single-value COLA adjustment might be applied, and how 202 PRAC and 811 PRACs should proceed to amend their assistance contracts to make utility reimbursement payments of $45 or less quarterly, recommended changes in some of the terminology, and requeting clarification concerning continued or modified use of EIV, and whether owners can pick and choose which elements to adopt. Read LeadingAge's comments here.

As these changes are optional, we expect a delay before all the potential benefits become known or felt. Widespread adoption of the changes enabled by this rule may take some time. Nonetheless, we believe that by reducing the frequency of mandatory third-party verification of certain elements of income and assets, owners should see a significant time savings. And other components of this interim final rule can make other administrative processes less burdensome. Ultimately, once comprehensive certification policy changes related to HOTMA are fully realized, owners should see their regulatory burden concerning annual recertification significantly reduced.

New Policy: Interim Final Rule on Streamlining Administrative Regulations and Implementing Family Income Reviews Under the FAST Act

On December 12, 2017, HUD published an interim final rule in the Federal Register that amends the regulatory language for PIH and Multifamily Housing rental assistance programs. This rule aligns the current regulatory flexibilities with those provided in the Fixing America’s Surface Transportation (FAST) Act. In addition, the interim final rule extends two of the administrative streamlining changes that were adopted in 2016 for the Housing Choice Voucher and Public Housing programs to Multifamily programs.

As part of this so-called and long-awaited "Three-Year Certification Interim Rule", HUD is implementing FAST Act provisions that allow public housing agencies (PHAs) and multifamily housing owners to conduct full income recertification for families with 90 percent or more of their income from fixed-income every three years instead of annually. This interim final rule also aligns the current regulatory flexibilities with those provided in the FAST Act by modifying the earlier streamlining regulations. According to the HUD RHIIP listserv message (#401, issued Dec 13), this would make the procedures for families meeting the fixed-income threshold as similar as possible to families who do not have 90 percent or more of their income from fixed sources, but still have some fixed income.

In addition to streamlining fixed income stipulations, the interim final rule also indicates that an owner may:

Make utility reimbursements of $45 or less per quarter ($15 a month) on a quarterly basis.

Accept family declaration of assets under $5,000. Third-party verification of all family assets will be required every 3 years.

Although HUD is issuing these changes as aninterim final rule, the Department has delayed the effective date for a period of 90 days (March 12, 2018). This allows participants in Multifamily housing programs and other interested parties to submit comments during the first 30-day period following publication of the interim rule. HUD will take any comments received by January 11, 2018 into consideration and determine whether any further changes should be made before publication of a final rule. Directions on the submission of comments may be found here.

And a Frequently Asked Questions document has been posted. Read it here.

What has long been called “three-year certification” needs to be clarified. With this interim rule, we’re really talking 3-year verifications of “fixed” income sources (particularly where at least 90 percent of family income comes from “fixed” income sources). Verification of medical expenses is not changed.

Mary Ross cautions, however, that “in some cases, you will not be able to implement these changes until you transition to TRACS v 2.0.3.A which is scheduled for release February 1, 2018.” And she points out that terminology may be different than used in standard practice.

While this interim final rule expands some of earlier flexibilities given to HCV and PH programs to multifamily housing, the most significant savings come from reduced time devoted to administrative tasks related to certifying income.

Streamlined Recertification Process for Tenants with Fixed Incomes

PHA/owner/agents will be able to reduce the burden of the annual income review, in some years, by applying a COLA to fixed income sources for families with incomes that are made up of at least 90 percent fixed income.

The PHA/owner/agent may, but is not required to, verify non-fixed income amounts in years where no fixed-income review is required (Years 2 and 3), but is still required to use third-party documentation for a full income recertification every 3 years.

More on streamlined verification of incomes and how this impacts EIV is covered in Notice H 2016-09, which should be read as a companion to this interim rule.

Family Declaration of Assets under $5000

This December 2017 Interim Rule amends the regulations so that, for a family that has net assets less than $5,000, the owner/agent verifies assets/income from assets in Year 1. At recertification, the owner/agent may accept a family’s declaration that it has net assets equal to or less than $5,000, and may accept a family’s self-certification of the anticipated income from that asset. The owner/agent is not required to take additional steps to verify the accuracy of the declaration. Third-party verification of all family assets will be required every 3 years. This aligns Multifamily Housing with Public and Indian Housing (HUD/PIH) and with common LIHTC practice.

In the interest of aligning policies across HUD programs, the regulation allows owners in the Section 202 and Section 811 programs to require tenants to provide the same certification of assets allowed in the other rental subsidy programs (namely, HCV, PH, and PBRA). Some clarification is needed on what owners of PRAC program properties will need to do in order to make these changes.

Utility Reimbursements

This interim final rule also explicitly allows owners to make reimbursements of $45 or less (per quarter) on a quarterly basis, in order to eliminate the burdensome process of processing and mailing monthly reimbursement checks. Owners exercising this option will be required to have a policy in place to assist tenants for whom the quarterly reimbursements will pose a financial hardship. For the Section 202 and Section 811 programs, the regulations do not contain the requirements around utility reimbursements, in general, leaving such requirements in the assistance contracts. Therefore, HUD is not including regulatory text to implement these new flexibilities in this interim final rule, but HUD has stated in the interim rule that it “would be open to amending the assistance contracts of any owners looking to take advantage of the flexibilities.

This Does Not Implement HOTMA

It is important to note that this interim rule does not address the increased standard medical deduction and new threshold for deduction of allowable medical expenses or incorporate authority to use the past year’s income and expenses that will be coming as HOTMA changes are implemented. But, for those who wish it, beginning to transition from full verification at each annual recertification to 3-year verifications (keep in mind, annual adjustments by owner and certain resident declarations are still required), this is certainly a step in the right direction.